Prudential has pulled out of the open market for annuities, and will only sell products to existing customers or those going through its direct channel in future.
The withdrawal of Prudential from the open market, coupled with the recent merger of Just Retirement and Partnership means the number of annuity providers active in the open market is falling.
There is a 22.1 per cent difference between the best and worst open market rates in May 2016, according to figures from Hargreaves Lansdown. Recent research from Citizens Advice shows 57 per cent of people buying an annuity are shopping around before doing so.
A Prudential spokesperson sasy: “We can confirm that we propose to make a change to conventional annuity business written with financial advisers. As a result of this change, from 17 June 2016, we will no longer accept applications for new external conventional annuity business only from financial advisers.
“There is no change to any of the other ways in which we offer annuity products to customers. We will continue to provide access to conventional annuities for financial advisers with existing Prudential pension clients and for advisers’ clients holding Prudential annuity income and rate guarantees.
“Asset backed annuity business – Income Choice Annuity – will continue to be accepted on a standard and enhanced basis from financial advisers.
“We, of course, remain committed to helping advisers secure the income in retirement that is best suited to their clients’ needs, whether that is flexible income, a cash payment or a secure income.”
Hargreaves Lansdown head of retirement policy Tom McPhail says: “Demand for annuities has now stabilised, and has even started rising again in recent months. However, far too many investors are still missing out on the best income for their needs because they aren’t shopping around. Our worry now is that with fewer annuity providers available on the market, more and more investors may end up bypassing the shopping around process and simply buying an income from their existing provider.
“Since the launch of pension freedom, more and more investors are arranging their income directly with pension providers, usually without taking advice. It is imperative therefore that everything possible is done to help them find the best possible deal.”
Annuity expert Billy Burrows says: “This is the end of a chapter for the annuity market, although lately Pru’s rates were such that they cannot have been getting much business. They have not been a top three provider for some time. The market won’t be affected too much by their departure, but you do get the sense that this signals the direction of travel for annuities, and if one of the mainstream annuity providers were to follow suit, rates would be affected.”